You are no doubt tired of hearing about Consumer Duty and vulnerability, however, the FCA’s recent announcement that it will be undertaking a review into the fair treatment of vulnerable customers is important and shouldn’t be dismissed.

This likely to be the regulator’s first real test of how firms have embedded consumer outcomes and vulnerability into their culture, processes and activities.

What prompted this review?

When Consumer Duty was launched last year, vulnerability featured heavily in the final guidance, but no new guidance was introduced. Instead, the FCA deferred to its 2021 paper, FS21/1.

Then, in December last year, the regulator indicated in its Consumer Duty “Next Steps” webinar that it was unhappy with the way the investment market acknowledges, records and supports vulnerable clients stating: “Evidence suggests that it is actually viewed as quite low priority for firms and we’ve also seen firms that do not consider it at all and provide the relevant support to consumers who are vulnerable.”

If we put two and two together, it is not unreasonable to suggest this will be an area of focus for the recently announced review. It will most likely identify good and poor practise, as Consumer Duty is principle-based, so we don’t expect any immediate regulatory changes. That said, should widespread poor practise be found (who are we kidding, of course it will – this is the FCA!) it could lead to enforcement action and increased regulatory engagement.

What is the FCA looking for?

The regulator wants to understand the needs of consumers, the skills and capabilities of your staff, product and service design, customer service and whether these support the fair treatment of those in vulnerable circumstances. It will also be looking at the outcomes you achieve for vulnerable clients and whether they are as good as those reached for others.

This assessment is going to consider a broad definition of vulnerability, which is a marked change from earlier reviews that focused on older customers. We can assume it will cover the four main drivers of vulnerability:

  • Health – both physical and mental illness, including short and long-tern conditions.
  • Life events – for example, bereavement, job loss, divorce/separations, etc.
  • Resilience – this relates mainly to an individual’s low ability to withstand financial shocks i.e., someone with little capacity for loss.
  • Capability – this focuses on those with little knowledge of financial matters or low confidence in managing money i.e., investors who lack experience.

It will come as no surprise that the self-proclaimed data-led regulator will conduct this review from a…you guessed it, data-led approach! It will be collecting information from firms and consumer representatives and combining it with customer research to forge its conclusions. What is not clear is if this will be an additional data collecting exercise or if some of the existing surveys/section 165s carried out so far this year will be used.

Start preparing now

The good news is our sector is knowledge rich. You already collect a lot of the information you need to assess vulnerability as part of the normal advice process. However, what firms often lack is the ability to join the dots and record this effectively.

When logging this information, you need to consider how it could impact on a client’s ability to interact with your advice process and how this should be translated into action.

Just because the FCA review isn’t likely to be published until the end of the year, doesn’t mean you should sit on your hands. We recommend taking some time to assess how your firm deals with vulnerability to prepare for a potential update to the guidance:

  • Have a look at your vulnerability policy – is it current and in line with Consumer Duty and FS21/1?
  • Do you have a process for recording vulnerability? Does everyone follow it?
  • Do you carry out vulnerability assessments? If so, are they reviewed and how often?
  • If you decide someone is not vulnerable, is this recorded and does anyone oversee the decision? For example, can a senior manager review your assessment? Does this form part of your firm’s management information?
  • Does everyone record the relevant information consistently and does it include actions that can be replicated?
  • Rather than relying on commonplace actions, try thinking outside the box. Are your actions relevant to the client? For example, the presence of a third-party might have its place, but it is not the solution in every instance of vulnerability.

We know you will probably have plenty of questions about the FCA’s impending review of vulnerability and we are happy to answer as many of them as we can. Don’t hesitate to contact us if you would like to discuss it further or you want advice on the way you record interactions with vulnerable clients. Telephone (0161) 521 8641 or email:

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